Southeast Asia, once known as Asia?s economic tiger, should speed up economic reforms or risk falling further behind China in the race for inward investment, Singapore?s prime minister said yesterday. ?To many investors, ASEAN remains 10 isolated, scattered national economies, too small to be worth paying attention to,? Lee Hsien Loong said on the sidelines of annual talks of the Association of South East Asian Nations (ASEAN). ?On my recent trip to Europe, the businessmen and ministers I met were all eager to hear about China. European businesses are engrossed by the possibilities of the Chinese market.?

In the early 1990s, Southeast Asia was at the centre of the global investment radar and was swamped by foreign investment, but the bubble burst in 1998, crippling some economies. When the region finally recovered, it found China had eclipsed them.

The world?s seventh largest economy, China has racked up double digit economic growth for more than the last decade and in 2004 sucked in $61 billion of foreign direct investment, more than twice that of Southeast Asia. China has already overtaken the United States as the largest trading partner for several Asian nations, including Japan, which has raised fears of potential Chinese economic and political domination of the region.

Bilateral trade between China and ASEAN grew by 25 percent in the first half of 2005, and China is the block?s fourth largest trading partner. Trade volume for the first six months of 2005 was posted at $59.76 billion.

Multinationals are increasingly setting up factories in China, taking advantage of ultra-low labour costs and a potentially huge consumer market, and shifting production from other Asian countries where costs are no longer competitive.